Steel industry sinking
CLOSURE OF ARCELORMITTAL PLANTS A SUCKER PUNCH Price controls on scrap metal favour small mills that can’t produce good steel.
The announcement by ArcelorMittal South Africa in November last year that it intends to shut down its plants that produce long steel products at the end of January has led to an outcry by manufacturers reliant on specific steel grades.
The International Steel Fabricators of SA (ISF) and businesses in the downstream steel industry fear that a big part of SA’s manufacturing industry might evaporate due to government interference that gives preferential treatment to smaller steel mills that remelt scrap metal to make steel.
Without saying outright the steel from small electric furnaces is of bad quality, ISF chief executive Neels van Niekerk hints that these second-hand steel products are simply not safe to use in certain critical applications, such as in the automotive industry.
“The steel is good enough for household use like burglar bars, fences and angle irons. It’s not good enough for anything requiring certified material like construction, motor cars and the mining industry.
“These mills aim for the informal and household markets,” says Van Niekerk.
He warns that the domino effects of the closure of ArcelorMittal’s Newcastle and Vereeniging plants that produce long steel products will include an expected increase in the import of finished goods to replace locally manufactured goods.
The users of products from the plants include construction, automotive, mining, electro-technical, electricity transmission, aero and defence, rail, wire, fasteners, concrete reinforcing, cladding and roofing and rail.
Most of these are totally dependent on ArcelorMittal as the only local producer capable of supplying the bulk of their input.
“The resulting steel shortages from this decision [to close the plants] will lead to the almost immediate closure of industries that are reliant on the supply of long steel and will subsequently bring production stoppages to many downstream plants over a wide range of depended sub-industries,” says Van Niekerk. ISF called a summit of industry stakeholders, including ArcelorMittal, last month to discuss the effects of the plant closures and appeal to government to find a solution to keep the plants open. While ArcelorMittal indicated that 3 500 direct jobs will be lost, industry bodies expect another 30 000 jobs to disappear “immediately”, such as those working at suppliers to plants.
Up to 100 000 additional workers could face unemployment once downstream businesses start to fail, based on Seifsa’s estimate that the steel industry employs 270 000 workers.
ISF says ArcelorMittal is in dire straits due to a government policy that forces scrap metal dealers to sell scrap metal to smaller steel smelters at a discount of between 30% and 40% of global prices.
This led to ArcelorMittal losing sales volumes.
In its November 2023 announcement, ArcelorMittal said it is embarking on a process to wind down its long steel business.
Another 30 000 jobs to disappear ‘immediately’